Former friends, turned bitter rivals, Google and Apple now own a virtually duopoly on the U.S. smart phone market. (Source: Flickr)

RIM appears to be fading fast with the BlackBerry smart phone brand dropping over half its U.S. market share over the last year. RIM is rumored to be considering pushing a new OS -- QNX -- to its smart phones in a bid to revitalize them. (Source: Smart Phone Mag.)

HP courteously recused itself from the market, to webOS fans' chagrin. The departure leaves Microsoft, RIM, Apple, and Google as the only remaining major OS makers. (Source: Mobile Knots)

(Source: NPD Group)

Google solidifies its lead, Apple remains close behind

When it
comes to veteran market research firm NPD Group, Inc., the latest
report [press release] on smartphones is more good news for two major
players and more very bad news for a third.

I. Google and Apple's Gains are RIM, Microsoft's Losses

For Google, Inc. (GOOG) and Apple, Inc. (AAPL) the news is happy.
Google rose from a 33 percent market share in Q2 2010 to a 52 percent
market share in Q2 2011 -- a 57.6 percent increase in market share which
came despite its legal
troubles [1][2][3][4][5].
Apple, resigned for now to play second fiddle to Google grew from 22
percent to 29 percent -- a 31.8 percent increase in market share.

The bad news came for Waterloo, Ontario-based Research in Motion (TSE:RIM) who saw its
U.S. market share drop from 28 percent to 11 percent -- a 60.7 percent decline.
In the last year the phone maker has lost nearly half its stock value as
well.

RIM appears to be fading fast.
Things look increasingly bleak for the company, which is rumored to be
preparing to push its new operating system --
QNX -- into the smartphone market in a desperate revitalization bid. It's
easy to draw analogies between RIM of today and Palm, Inc. at the start of the
webOS era -- beloved by some loyal customers, but increasingly scorned
by the masses. The similarities run deep in that both companies followed
the largely defunct first-party OS model, a sluggish pace of handset releases,
and inferior hardware.

The study also showed troublesome signs for Microsoft Corp. (MSFT). Windows
Mobile held approximately 10 percent of the U.S. market last year. But by
this year its successor, Windows Phone 7, had only accrued approximately
1 percent of the market, while Windows Mobile hung on to 4 percent of
the market. In other words, Microsoft saw its cumulative market share
halved.

However, unlike RIM, Microsoft has deep pockets to try to revitalize its sales.
And with the upcoming launch of WP7's first
major OS and hardware refresh, Mango, which seems to have
strong support from a number of top third party handset makers,
Microsoft looks poised to turn the corner and become a viable third place
competitor.

II. Motorola Dips, Faces Puzzling Outlook

In terms of individual phone manufacturers, the biggest loser was recent
Google purchase Motorola
Mobility, Inc. (MMI). Motorola saw its
total market share drop from 15 percent to 12 percent, and its share of the
Android handset market drop from 44 percent to 22 percent.

NPD analyst Ross Rubin was enthusiastic about Google's acquisition,
though, which he says is beneficial to Android as a whole. He comments,
"Google's acquisition of Motorola shifts the balance of power in the
handset-patent conflict between Google and its operating system competitors.
Android's momentum has made for a large pie that is attractive to Motorola’s
Android rivals, even if they must compete with their operating system
developer."

He adds, "Much as it did in the feature phone market in the RAZR era,
Motorola is experiencing increased competition from Samsung and LG in the
smartphone market. Closer ties to the heart of Android can help inspire new
paths to differentiation."

Of course, the Google acquisition of Motorola Mobility appears to have been
primarily motivated from an intellectual property standpoint, so it remains
unclear whether it will give choose to give unique advantages to its first
party feature phones at its third-party partners' expense.

III. What Will the Market Look Like Next Year?

Overall there's still a great deal of uncertainty in the market.
Hewlett-Packard Company (HPQ) did refine the picture a
bit, but voluntarily removing itself (and the
ex-Palm webOS unit) from the smart phone market.

Looking ahead, though, it remains to be seen whether RIM will find a way to
revitalize itself or will become an acquisition target for one of the more
successful or deeper-pocketed phone makers. Don't be surprised if RIM has
dropped even further in market share next year -- or has thrown its weight
behind Android or Windows Phone 7.

But the biggest two outstanding questions are how Mango will be received and
what will be the outcome of the Apple-Android legal war. The outcome of
those two factors should play a critical role in determining what the market looks
like next August, when we sit back and look at the results of Q2 2012.